Tag Archives: debt-to-income ratio

Managing your finances before homeownership to save your home from a foreclosure

Are you planning to purchase a new home? If yes, you have to buck up your finances so that you don’t fall in trouble in the near future and then risk losing your home to a forced foreclosure. Managing your finances is the most important job that you have to do when you plan to take out a home mortgage loan from a bank. The mortgage loan entails your home as collateral so that when the borrower defaults to make the payments on time, the lender can foreclose the house and recuperate the money. “How much house can I afford” is the most important question a borrower should ask himself before taking the plunge. Here are some important steps that you should take in order to manage your finances once you plan to take out a home loan.

Stop all the unnecessary expenses: Whenever you contemplate buying a new house and forget paying further rent, you should stop making all the unnecessary expenses that you can do without. If you don’t read magazines, stop the monthly subscriptions to magazines. If you can cook well, stop dining out every weekend as this will save your dollars in the long run. You can even do without the cable connection at home. If you can build an emergency fund, you can easily take out a mortgage loan at an affordable rate.

Stop using your credit cards: Are you aware of the fact that the mortgage lender will check your DTI ratio or the debt-to-income ratio that is the ratio between the total monthly debt obligations with your monthly income. If you keep on purchasing things with your credit cards, you’ll drown in unsecured debt and thereby be forced to take out a home mortgage loan at an unaffordable interest rate. Therefore, stuff your wallet with cash so that you may stop buying things when you’re exhausted.

Save enough money: Yes, this is the ultimate secret that will take you to the path of a smooth mortgage loan approval. The mortgage loan underwriter will check the amount you’re paying down while taking out the loan amount. The more you pay down, the lower will be the rate offered to you. You should save enough money so that you can at least pay down 20% of the loan amount and avoid paying PMIs later on.

Keep track on your credit score: Don’t take any wrong step that can hit your credit score. Pull out a copy of your credit score time to time so that you know where you stand financially. Repair your credit as much as possible so as to grab the best mortgage loan at the most covetable cost.

When you’re dreaming of homeownership, make sure you follow the money tips mentioned above. By taking all the tips mentioned above, you can get the most appropriate loan in accordance with your affordability. Don’t forget to ask yourself “how much house can I afford” before taking out the loan.

Search this site

Search for:

Assisted Living Research Institute has created a dedicated section on their site that provides comprehensive information.
Click to find out more on topics like: available care options, financial support, and free resources that are available.

About John A Silva

As your local real estate adviser in the area of San Diego County with over 28 years of experience, my goal is to provide you with relevant local housing market information, tips, and advice.

Get a free market evaluation on your home and look for homes on the MLS in San Diego County now FREE!!

Subscribe via Email

Follow Me On The Web!

Heal from Foreclosure

For a Compelling Guide to weaving through ALL the experiences of a hardship with applications for coping personally and with family: having to sell Your Home is unbelievably lightened! Anyone that would never consider selling their home, this is a MUST read.